The International Insurance Society Inc. (IIS), which brings together
the academic and business sectors of the insurance industry, held its
annual seminar in Paris in July. More than 430 delegates from 50
countries mulled over future survival strategies for insurance companies
in the face of changing markets.

Gentaro Kawase, chairman of Nippon Life Insurance Co. in Tokyo,
pointed out that 90 percent of Japan's population has purchased
life insurance. "The amount of life insurance in force is about
four times greater than Japan's GNP," he noted. But needs are
shifting from death or survivor benefits to protection for life,
including savings-type policies such as annuities. He attributed the
shift to an aging population and erosion of the lifetime employment
system.

According to Mr. Kawase, the life-insurance industry should develop
new products, such as credit-card access, that offer instant liquidity
and accessibility. This in turn will require costly restructuring of
current systems, he added.

European Perspective

Jacques-Henri Gougenheim, chief executive officer of Union des
Assurances de Paris (UAP), noted that the European market is fragmented
and diversified. He said several thousand insurers operate within the 12
countries of the European Community. Yet the five largest insurer groups
in Europe have a total market share of 20 percent; in the United States the corresponding figure is 50 percent, in Japan it is 65 percent.

The single market is causing insurers to re-evaluate their
positions, and various strategies are emerging, including forging links
with banks through marketing agreements, geographical expansion through
acquisitions and increasing market share, according to Mr. Gougenheim.

Some European insurance groups have invested in North America
rather than within the EC, preferring "to confront today's
reality over there, rather than wait here for the end of the process
leading to the single market," said Mr. Gougenheim. UAP is hoping
to double its European market share outside of France, which is about 3
percent, he said. The EC, he noted, is working hard to harmonize
insurance regulations, which will ultimately apply to foreign companies
as well. He also urged the reduction of protectionist regulations that
still exist, "explicitly or insidiously," in other markets,
including the United States and Japan.

"In more than half the states discriminatory rules are applied
to certain foreign insurers, owing to the structure of their share
capital," said Mr. Gougenheim, referring to the U.S. prohibition of
admitting government-owned companies. He believes EC-based insurers will
invest in the formation of Eastern European companies, but views the
Allianz purchase of the East German insurer as perpetuating a monopoly.

U.S. Perspective

Maurice R. Greenberg, chief executive officer of American
International Group Inc. based in New York, offered a U.S. perspective.
"If the marketplace is to drive change in the 1990s, there needs to
be a recognition that successful companies cannot be responsible for
paying for the mistakes of the unsuccessful ones. ... The safety nets
and protections that have been built into our system for inefficient and
failing companies should not be regarded as being in the public
interest." He said they are "a distortion of the free-market
mechanism."

Predicting that trade will replace security as the primary
international concern in the coming decade, he stressed the importance
to insurers of a successful conclusion to the Uruguay Round of GATT negotiations. "The agreement that comes out of the Uruguay Round
will determine how and under what conditions insurers can enter new
markets or expand in existing ones," said Mr. Greenberg. An
agreement that assures national treatment and market access to all will
benefit all, he stressed. In a later session, Linda Powers of the U.S.
Department of Commerce and a member of the U.S. GATT negotiating team,
provided a briefing on the process and encouraged insurers to
communicate their needs to their governments.

Cyclical Solutions

Painting a picture of the U.S. insurance industry's poor image
and associated problems, John J. Byrne, chief executive officer of Fund
American Cos. Inc. in Novato, CA, said insurance cycles were the root
cause of the problem. His solutions called for upgrading insurance
accounting rules and creating a self-regulatory body to monitor solvency
and work with government regulators.

"Solvency and credibility are one," said James P.
Corcoran, a partner with Wilson, Elser, Moskowitz, Edelman & Dicker
in New York. "To have a global financial insurance system, it is
necessary to put in place an efficient and effective regulatory
system." He urged dialogue to determine solvency criteria on an
international basis.

Clemente Cabello Pinchetti, president of Grupo National Provincial
in Mexico City, said, "Latin American governments have created
obstacles to the full development of the insurance markets."
Fortunately, the rules are changing, he noted, particularly in Mexico.
Regulatory modification are required throughout the region, including
liberalization of the insurance sector to permit the entry of foreign
investment. La Federacion Interamericana de Empresas de Seguros, the
Latin American insurers' association of which Mr. Cabello is
immediate past president, has been actively pursuing change in many
countries, he said.

In addition to presentations, the seminar had discussion groups and
a roundtable for academics to highlight their insurance research.

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